3 Minute Gold News

Jim is the Chief Global Strategist for West Shore Funds, former general counsel for Long Term Capital Management, and a consultant to the U.S. Intelligence community and the U.S. Department of Defense.

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Jim Rickards

Some people think that if the Canadian dollar gets cheaper relative to the US dollar then that will help exports and give the Canadian economy a boost.

History says that all you’ll get is inflation.

The way to improve the economy is not with a weak dollar, but with investment, good tax policy and structural changes.

BRAZIL

In 2011, Brazil had one of the strongest currencies in the world. They decided it was too strong and started cutting interest rates and bringing in capital controls.

It didn’t help the economy, and now they have stagflation which is inflation and a recession — the worst of both worlds.

The Canadian dollar may go lower but Jim believes that it won’t boost the Canadian economy. He expects instead that it will create inflation and bubbles in housing and stocks.

You see it going on in other countries like Australia and Brazil.

MARIO DRAGHI

European Central Bank President Mario Draghi is Jim’s favourite central banker — he says little and does less. Mario is the only one who understands central banking.

Central bankers have far less power than people assume.

The problem with the Fed (the US central bank) is that starting with Ben Bernanke and continuing with Janet Yellen, they wanted their communications policy to be more transparent.

It used to be that they didn’t say anything.

Now the problem is that they don’t shut up.

You’ve got twelve regional presidents and five members of the Board of Governors who give speeches every other day.

It replaced one kind of uncertainty, which is that you don’t know what they’re going to do, with another kind of uncertainty, which is that you don’t know who to believe.

We’d all be better off if they mimicked Draghi.

Everyone expected Draghi to do quantitative easing back in 2012. He went to negative rates in the summer of 2014 and quantitative easing in January 2015, but he started talking about it in 2012 when he said he’d do “whatever it takes”. That was two years of doing nothing.

DECEMBER INTEREST RATE HIKE?

People should be concerned.

This could be one of the three greatest blunders in the history of the Fed — and they have a long history of blunders.

In 1927 they raised rates prematurely. In 1937 they also raised rates prematurely. This could be their third time.

The US economy is probably going into a recession. The time to raise rates was in 2010. If they had raised in baby steps between 2010 and 2012 then they’d be at about 1 3/4% today, and they’d be in a position to cut today.

With employment, we’re losing one oil patch job at $80,000 per year and getting three bartenders at $25,000 per year. There’s dignity in all work, but we’re not getting the aggregate demand, the real wages and the discretionary income we need to drive the economy forward.

Plus, the psychology is awful.

If you want to create inflation (which the Fed wants) it’s like making a ham and cheese sandwich.

You have the ham which is money supply and you need the cheese which is velocity (how fast people are spending and money is moving).

There’s no cheese.

When people had savings from the recent gas price cut they didn’t spend it — they paid off debt and put it in the bank.

Snow on the ground and silence, complete silence when I sit watching over the waves in the day. No birds or animals. No wind moving the branches — just amazing deep and large silence as far as I can see and feel. The bears are hibernating and the ducks have gone. Oh…but there was a bobcat at a neighbour’s chicken coop. And two eagles flew overhead a few days ago.

Two new songs down and ready to record.

The postal package from my gold and glass studio has been sent away.

World events are speeding up, so I stop looking at the news moment by moment, and take time to process instead of being processed. Don’t you find the barage of information overwhelming?

Media is a tool meant to sway groups of people all at once. It can be a very good thing…or not so good. You can’t know what an individual will do in a given situation, but you can know with quite a lot of certainty what a group of people will do. Edward Dewey figured that out as the U.S. Department of Commerce chief economics analyst. He was appointed in 1931 to try and figure out what caused the stock market crash. He was big into cycles and big into what groups do inside those cycles.

Mass media is all about taking a message from one-to-many. Just be aware of who owns the message and the medium to get that message out, and what they gain if the group believes that message and acts on it.

Wag the Dog is ramping up. Beating, beating, I can hear their drums. Beating. Beating. Those lyrics were written just before the Ukraine situation started, and they just sit more and more true every day.

World alliances are forging, breaking and re-forging in new places. Proxy wars are becoming something far less than proxy. Currency wars are becoming more intense as the game of coins and crowns switches up and the yuan is added to the IMF’s world money basket. The U.S. dollar is king for now. A uni-polar world is becoming a multi-polar world, so that another party can come along and become the uni-polar leader of the whole ball of wax. Or oil. A big ball of oil.

The thing about this “time”, as Gerrit Gerritt said in A Time is Born, is that this model, this era, must always be expanding in order to keep going on. What happens when we’ve exhausted the space and energy and human capital, and there’s less ways to expand? Does a new era start where energy and people don’t get used up in the production process? Oil won’t be the catalyst if that’s the way of it. Or there becomes an intense struggle for resources as the players who are winning this era’s game try to keep it going.

That pendulum between conquer and maintain, rise and fall, boom and bust, will swing back. If we don’t use energy and resources to maintain and prune what we have, and instead just keep conquering new ground, then we will exhaust everything and decline. The era will end. The empire ends. Governments and banks are extending this time, this era of creation by debt, this model, by making promises. They use the future’s space and energy and human capital for benefit now. Their benefit. As long as there is faith in a return for an individual at the expense of the group it will work for them, and if it no longer works then perhaps there is expansion by force. But the farther it swings the harder that ball will come back to center again.

The song Rod and Ring covers this. Rise and fall, boom and bust, every empire and marketplace must move to the rod and the ring.

Some have done well in the past when the pendulum swung hard. There’s a coming swing. That means it’s a good idea to do some research on who does well and how to put oneself in that same position to get ready. The creative process during the research brings new ideas. We each have something, some way that we express that creativity that brings us excitement. Definitely worth the time to explore.

How about that. A time, an era, a model of exploration for each of us inside the larger time that’s coming to an end.

The Greek bank holiday and long lines to get a few euros for the day. Debt deals behind closed doors. The media telling us what opinions to have. China building islands in the South China Sea and claiming all the international waves. More dealing to come. More standing in line for those who owe. Who owes? There’s a long line of nations in debt and this is far from done.

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Preparing for the Fall live boutique album is available on iTunes — featuring Wag the Dog, Black Swan Dive, American Pie and Gods of the Copybook Headings.

The copybooks of the early 1900s gave us all the wisdom we need. The sayings that were copied are the truths, the gods, of our world. All the empires who followed the gods of the marketplace instead have fallen, and there’s terror and slaughter when the gods of the copybook headings return. The lyrics are by Rudyard Kipling. One of my gurus.

See the bankers wave their Wall Street wands and conjure piles of paper green. Naked short selling is like betting that your neighbour’s house will burn down. But in this scenario it happens to burn down. If the bankers win then we lose the whole world as we know it. I wrote this in 2009, with a lyric “A little grease (Greece) is floating out to sea, and little pigs (Portugal, Italy, Greece and Spain) are bobbing up and down, they’ll send a storm and we’ll see, when the tide goes out who’s naked on the beach“, and it’s coming on now. The world is changing as we know it.

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Nothing on this site is intended as individual investment advice. We’re all watching which way the wind is blowing.